How the Hong Kong Protests Are Affecting Its Economy.
Riots in Hong Kong began earlier this June when there were plans to allow certain criminals to be extradited to Mainland China. Yet, due to the people of Hong Kong having more rights than the people of China, there was a growing fear that this decision would undermine Hong Kong’s judicial independence, and Hongkongers would face unfair trials and potential violent treatments. The people of Hong Kong are now fighting for the implementation of a complete democracy to protect their rights. These riots have worsened over time as people resorted to violence and the police used bullets in a poor attempt to maintain order. This severely impacted Hong Kong including its economy.
Recently, Hong Kong has faced a drastic fall in consumer spending on non-essential goods as summer retail sales are expected to be down by more than 10% compared to the previous year. Additionally, protests led to the shut down of the Hong Kong airport and as a result, the state faced a $76 million hit only from flight cancellations. Furthermore, the conflict within the state is acting as a deterrent, preventing more tourists from entering the state, especially tourists from China that make up the majority of travelers in Hong Kong. The number of visitors from Mainland China plummeted nearly 55% since July. Air travel currently makes up 5% of Hong Kong’s GDP and hence, this significant fall in sales will drastically worsen the nation’s economy. There has also been a cancellation in several key events like the Hong Kong Tennis Open, Hong Kong Cyclothon, and Hong Kong Wine and Dine Festival.
More than $600 billion of the stock market value has been completely erased since July. The impact of the stock market is so drastic that several economists believe that the economy might be on the brink of a recession. The riots have also added stress on the public transportation system, thus limiting the number of people who use public transportation. This worsens the mobility of labor and reduces job opportunities for workers across the state. With Hong Kong having one of the highest property prices in the world, the property value within the nation is also at risk of plummeting. Bank of America is expecting a nearly 10% fall in property prices.
If these riots continue to persist, there remain additional threats to the nation’s economy. By 2018, there were over 1,520 multinational companies in Hong Kong in an attempt to expand into the Chinese territory. There was a gradual movement of more firms setting up in Mainland China due to the increasing levels of economic influence. The persistent riots are likely to further deter such investments by foreign companies and increase the movement of firms to China. The movement of these firms will dampen the level of available jobs in the Hong Kong economy, thus limiting the potential growth of the state.
The state of the economy currently depends on how much control China will have over Hong Kong in the future. If China decides to take more control over Hong Kong than the “attractive legal environment”, Hong Kong’s economic hub will erode away and the number of multinational companies Hong Kong will decrease. If the needs of the Hong Kongers are met, there is potential for the economy to recover and avoid a recession. However, the persistence of the riots can create a further environment for instability amongst the people and the economy in the long run
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